In this post, I report on WorkAccord’s continuing examination of the topic of Australian labour hire arrangement intermediaries and attempt to untangle the knotty problem of distinguishing providers (who need labour hire licences) from mere intermediaries (who don’t).
I put forward a fresh proposition that it is possible, within labour hire supply arrangements, for there to be more than one labour hire provider in respect of the same worker/s, and suggest that the possibility arises from the different types of arrangement which a provider may have with its workers and from the different sources of the attendant payment obligation.
Drawing on the competition cases, I also discuss what is meant by an “arrangement”, and how the licensing schemes’ focus on arrangements rather than on contracts results in casting a very wide net that is intended “to ensure that labour hire arrangements cannot be hidden behind a particular set or combination of arrangements”.
I conclude with some practical tips for identifying and analysing labour hire arrangements under the labour hire licensing schemes.
Progress so far…
So far, we’ve untangled the following threads:
- In order to distinguish between providers (who need labour hire licences) and intermediaries (who don’t, but may need other types of licence)[i] it is necessary to examine the whole of the arrangement by which workers are engaged, supplied, managed, accommodated, and paid.
- That means we need to consider arrangements made with:
- work seekers;
- clients – either hosts (hirers) or users.[ii]
- Three types of arrangement may require a labour hire licence:
- supply arrangements (Qld, SA, Vic, ACT);
- accommodation/ recruitment arrangements (Vic); and
- contractor management/ recruitment arrangements (Vic).
- The arrangements can be distinguished according to their different functions and the different definitions of worker applicable to each type of arrangement.
- We can identify three broad types of intermediaries who may participate in the arrangements recognised in the legislation: supply intermediaries; recruitment/ placement intermediaries; and payment intermediaries. They can also be distinguished by the functions they perform.
- Intermediaries participate in arrangements between:
- a provider and a host (“host-side intermediaries”); and/or
- a provider and a worker (“worker-side intermediaries”)
- Other participants may sometimes be involved in labour hire arrangements – e.g., by supplying supporting services without being either an intermediary or provider.
- Intermediaries and other contributing participants can be distinguished from providers because only providers have workers (as defined).
- The definitions of worker in Qld, S.A. and the A.C.T. all require that the individual who is to perform the work enters into the requisite arrangement with the provider. This would seem to require that the provider and the worker make reciprocal commitments to each other; although they need not be legally enforceable.
- Contrastingly, the various definitions of worker in Victoria require merely that an arrangement be “in force”. The different formula used in Victoria potentially raises a question about whether a worker could be a passive participant in such an arrangement – that is to say, whether a worker could be “entered into an arrangement” made by others, without the necessary reciprocal commitment and perhaps without knowledge or consent.
- We prefer the view that this question should be answered in the negative, because Vic. s. 9 requires that the arrangement must still be between the individual and the provider. We also consider that passive entry into a labour hire arrangement would be inconsistent with the principle that a contract of employment (at least) cannot be novated or assigned without the employee’s consent;[iii]and would run counter to the dictum in Gribbles Radiology that “no employee is an asset in the employer’s balance sheet to be bought or sold”.[iv] Accordingly, we take the view that the making of reciprocal commitments between provider and worker is also an essential element in Victoria.
Weaving some of the threads untangled so far
We applied these propositions to examine a hypothetical scenario for a fictional, Canberra-based, temp staffing agency.
Our fictional agency, “Holdings” claimed that:
- it did not supply its temps directly; other related companies did that; and
- it did not pay its temps; an outsourced payroll company did that.
In that examination, we reached a point where it appeared that “Holdings” would require a labour hire licence for the supply arrangement it had with its temps.
We also discovered some additional supply intermediaries and a payroll intermediary. Finally, we highlighted some “loose ends”, which we were able to pick out from the intermediaries’ involvement in Holdings’ supply arrangement.
You can follow that story by viewing our YouTube video, A.C.T. Supply Arrangements with Ashlee and Daniel.
Picking out a new thread
The exercise led us to uncover a further proposition, which we can now state provisionally:
- When intermediaries, participating in an arrangement, additionally form their own arrangements with workers, there arises the possibility that those participants have ceased to be intermediaries and have become providers. In this scenario, it seems that there can be multiple providers, having different payment obligations – some legal (e.g., arising from an employment contract); some “moral” or equitable arising from non-contractual “arrangements”.
It’s not just about the contract
This possibility suggests that we need to look more closely at what is meant by an “arrangement” – particularly as there seems to be a view, currently circulating, that all issues can be determined by the agreed terms of the parties’ formal contract.
We know that view doesn’t stack up because the express provisions of the labour hire licensing Acts of Qld, Vic and the A.C.T. all state that a person can be a labour hire provider regardless of whether the provider enters into any contract with the worker for the performance of the work.
Focus on the arrangement
The labour hire licensing Acts focus on arrangements between providers and their workers. We know, from our consideration of “the Regardlesses”, that an arrangement need not be contractual.
The “Regardlesses” are the set of provisions, inserted into each of the four Acts,[v] that provide that a person may be a labour hire provider regardless of whether they: employ their workers; have a contract with their worker; have a contract with their hosts/hirers; or supply workers directly or through intermediaries.
There are some variations between the states and territories, but the labour hire licensing Acts are intentionally cast very wide. The pattern was laid down in Qld and set out in the accompanying Explanatory Memorandum:
“…a provider provides labour hire services whether or not:
- the worker is their employee;
- a contract is entered into between the worker and provider, or between the provider and the [hirer];
- the worker is supplied by the provider to another person directly or indirectly through one or more agents or intermediaries, for example through a chain of labour hire arrangements; and
- the work done by the worker is under the control of the provider… or another person…
This is to ensure that labour hire arrangements cannot be hidden behind a particular set or combination of arrangements.”
What is an arrangement?
The Australian Competition and Consumer Commission (ACCC) provides helpful guidance about what is meant by an “arrangement” in competition law, where certain contracts, arrangements or understandings may be unlawful. It says:[vi]
“Essentially, [arrangements and understandings] involve the development of a plan of action between two or more people that may not be enforceable at law but they have every intention of following.
…when each of two or more parties intentionally arouses in the others an expectation that he (sic) will act in a certain way, it seems …that he (sic) incurs at least a moral obligation to do so. An arrangement as so defined is therefore something whereby the parties to it accept mutual rights and obligations.”[vii]
The ACCC goes on to explain:[viii]
“To …make an arrangement it is not necessary for anything to be written down. In fact, such agreements are often not put into writing. Nothing need even be expressed—a ‘nod and wink’ is sufficient.
If necessary, the court will infer the requisite ‘meeting of minds’ from circumstantial evidence such as evidence of joint action, similar pricing structures, or even from evidence of opportunities the parties had to reach an understanding.
It is important to consider both what is actually said and what each party understands to be the position.”
Consistently with that broad view of what amounts to an arrangement, the Victorian regulator explains, simply, that “arrangements include informal or formal agreements.[ix]
Something more than a mere hope.
However, an arrangement involves something more than a mere hope or expectation.
In ACCC v Channel Seven Brisbane Limited, the High Court said:[x]
“An arrangement or understanding ordinarily involves an element of reciprocal commitment even though it may not be legally enforceable. It involves more than a mere hope or expectation that each party will act in accordance with its terms.”
So, what is the something “more” – the additional element that converts loose assent, or a sense that “we are all on the same page”, into an arrangement of interest under the labour hire licensing Acts?
A helpful explanation was provided by Gray J in Australian Competition & Consumer Commission v Leahy Petroleum Pty Ltd,[xi] when considering the related expression, “understanding”. Once again, it takes us back to a sense of “moral obligation” or – an expression that I especially like – something that is “binding in honour”.
“…there can be no such thing as an understanding that leaves each party to it free to do whatever it wishes. Whatever word may be chosen to represent the essential element of an understanding for the purposes of the relevant statutory provisions, it is clear that element involves the assumption of an obligation, unenforceable in any court of law, but merely morally binding or binding in honour.”
Armed with this information, you may now be in a position to review your own operations to see if you are involved in any labour hire arrangements that you make, participate in, or support – whether as a provider, host/hirer, intermediary, user, or contributor.
Think about who all the participants in the arrangement are and identify what roles they play. You might want to pay particular attention to any points in your operations that interface directly or indirectly with the people who are to perform the work.
Keep in mind that inter-state labour hire arrangements may be governed by more than one licensing scheme.
Next, you might try to identify what type of labour hire arrangements they are – whether they are supply arrangements, recruitment/accommodation arrangements, or recruitment/ contractor services management arrangements.
When you are scanning for labour hire arrangements governed by the South Australian and Victorian licensing schemes, you’ll have to apply the different “work-(in-and)-as-part-of” qualifications. That could necessitate your undertaking fact-sensitive inquiries similar to those required to apply the employment agency provisions of payroll tax legislation.
In South Australia, you’ll be able to limit your investigation to arrangements for the performance of “prescribed work”.[xii]
Once you’ve identified your arrangements of interest, check to see if they involve persons who are your workers (as defined) for each type of arrangement that you participate in.
Remember, that some workers are exempted under the supporting regulations and declarations. If you reach a conclusion that an individual appears to be your worker (as defined) make sure you go on to the next stage and consider the various grounds for exemption.
Supply Arrangements & Recruitment/ Accommodation Arrangements
For supply arrangements and recruitment/ accommodation arrangements, where the payment obligation falls can be a deciding factor.
Keep in mind that a payment obligation can arise even if you are not the employer or engager of the worker, and that it needn’t be a contractual obligation – a moral obligation would seem to suffice.
Work out where each payment obligation falls. It might fall on you, or it might fall on another participant in the arrangement. Different types of payment obligation may fall on more than one participant in the arrangement.
You will use that information to work out whether the people who are to perform the work are your workers (as defined) for the purposes of the particular type of labour hire arrangement you are investigating.
Under a supply arrangement, the payment obligation falls on the person/s who is/are supplying the worker.
Under a recruitment/ accommodation arrangement, the payment obligation falls on the person for whom the work is performed.[xv]
If the persons who are to perform the work turn out to be your workers (as defined), you are probably a labour hire provider. If they are not your workers, you are likely to be an intermediary, user, or host/hirer; or to be providing support services.
Recruitment/ Contractor Management Services Arrangements
Under a recruitment/ contractor management services arrangement, it is not material where the payment obligation falls. What matters is whether the person who recruits the worker manages the contract performance by the worker.[xvi]
Note that the object of the management services is performance by the worker. Although the Victorian Regulator has issued guidance material[xvii] indicating that:
Examples of businesses that are captured by this provision include businesses that recruit or place independent contractors, and then provide ongoing administration and payroll functions, or supervision or performance management functions for hosts.
It may be necessary to distinguish between performance of the work contract by the worker and performance by the person for whom the worker performs the work. It is difficult to see, for example, how the provision of a payroll function for a host involves performance of the work contract by the worker – except perhaps to the extent that it involves management of time sheet completion and validation.
Conclusion: A problem for the commercial courts?
You will quickly see what the problem is – the Labour Hire Licensing Acts are couched in language that is either so general or so nuanced that it is difficult to interpret.
Those points might not be pursued in an enforcement action, where priority might be given to the prosecution of clearly unlawful and egregious conduct. But they are precisely the sort of point that could be fairly taken by a commercial litigation defence lawyer to defeat or delay a claim for payment on the grounds that the services for which payment is claimed arguably involve unlicensed labour hire services.
In later posts, I will address additional scenarios and begin to explore the worker exemptions in greater detail. I’ll also address intermediary and host/hirer responsibilities and penalties that may be imposed for breach or involvement in avoidance schemes.
I hope this exploration to date has helped to distinguish between providers and intermediaries a little more clearly, and that it has outlined an approach to characterisation that you can implement. So far, the results have been promising.
Let’s talk again soon.
[i] For example, an employment agents licence under the Agents Act 2003 (ACT); Employment Agents Registration Act 1993 (SA); Employment Agents Act 1976 (WA). Qld and NSW also have vestiges of private employment agent regulation but no longer have PEA licensing schemes.
[ii] We distinguish hosts/hirers as the person for whom the work is performed from users (of labour hire services) who are found as host-side intermediaries in a workforce services contracting chain. Users typically do not enter into any arrangement of substance with workers, but merely “buffer” the relationship between a labour hire provider, who does have such an arrangement, and a host who requires work to be performed.
[iii] Nokes v. Doncaster Amalgamated Collieries, Ltd. [I9401 A.C. 1014.
[v] Qld s. 7 (2); SA s. 7 (3); Vic ss 7 (2), 8 (3) and 9 (3); ACT s. 7 (3).
[vi] ACCC (n.d.) Anti-Competitive Conduct, https://www.accc.gov.au/business/anti-competitive-behaviour/anti-competitive-conduct.
[vii] Drawing on the Federal Court decision in TPC v Nicholas Enterprises Pty Ltd (No 2) (1979) FLR 83.
[viii] ACCC (n.d.) Anti-Competitive Conduct op. cit.
[ix] Labour Hire Authority (n.d.) Guidance Note on provision of information about workers https://labourhireauthority.vic.gov.au/media/1017/provision-of-information-under-s19.pdf
[x] Australian Competition and Consumer Commission v Channel Seven Brisbane Pty Limited  HCA 19 per French CJ and Kiefel J at .
[xii] S.A. s. 6 defines “prescribed work” as cleaning work; horticultural processing work; meat processing work; seafood processing work; trolley work; and any other work of a kind prescribed by the regulations.
[xiii] Vic. S. 8 (1)
[xiv] Vic. S. 8 (2)
[xv] Vic. S. 9 (2) (a).
[xvi] Vic. S. 9 (2) (b).
[xvii] Labour Hire Authority (2019) “Contractor Management Services” https://labourhireauthority.vic.gov.au/provider/contractor-management-services/